Last week I published an article, written with Crowdfund Insider director and editor Charles Luzar on the subject of fraud in crowdfunding: Crowdfunding Fraud: How Big is the Threat?
We researched and gathered data from hundreds of crowdfunding campaigns to get a sense of the scope of fraud and potential fraud. Our specific purpose was not to come to any conclusions, but to get an initial state of the fraud landscape, and to solicit a more complete set of fraud cases – for a subsequent academic study of the data. We want to know, apart from the hype and headlines, the true rate and potential for crowdfunding fraud – particularly since the specter of fraud is one of the primary drivers of the debated laws and regulations surrounding investment crowdfunding.
Give it a read. And if you know of a case of fraud – no matter how serious, obscure or questionable – please use the link below to submit it to us for our study.
Fraud in Crowdfunding
As crowdfunding becomes mainstream, the potential for fraud will inevitably increase. It seems that each new day is accompanied by a scathing article or op-ed warning that we need to protect the general public from the impending onslaught of boiler room con-artists. Indeed, the issue of fraud protection has transformed the process of legalizing equity crowdfunding into a grueling, complex and contentious three-year process – as regulators, industry stakeholders and special interests wrangled over new rules meant to protect investors from fraud.
In this initial study, we came up with a set of fraud categories, unique to crowdfunding:
Gray Areas: A Taxonomy of Crowdfunding Fraud
- Preempted Fraud
- Stillborn Fraud
- Attempted Fraud
- Perceived Fraud
- Backer fraud
- Backer-Creator Fraud
- Broker/Portal Fraud
With your help, we may be able to offer some valuable insights on crowdfunding fraud – based not on conjecture, but on on actual cases and data; insights that can help guide and shape the next generation of crowdfunding regulations and best practices.
For the full article – go to Crowdfund Insider – Crowdfunding Fraud: How Big is the Threat?